Inverted isolation formed with spacers

A method of forming a semiconductor device so as to provide the device inverted isolation trenches with convex sidewalls. Initially, a plurality of composite isolation posts are formed on a substrate through successive deposition, lithography, and etching steps. The posts comprise a bottom layer of silicon dioxide and an overlying etch-stop layer of silicon nitride. An insulating material is then deposited over the isolation posts and areas of the substrate. Isolation structures are established by etching the insulating material to form convex sidewall spacers at the vertical walls of the isolation posts. Active areas between spacers are filled with semiconductor material. In an embodiment, a strained cap layer may be imposed on the active areas. The strained cap layer has a lattice constant that is different from the lattice constant of the semiconductor material.